The Transition to Multipolar Economics - Gold for OilMar 11, 2022
The upcoming gold-for-oil event we expect will mark the end of the petrodollar.
We expect an announcement this year from the Russian government to declare something like "due to the US sanctions, Russia is no longer capable of exchanging oil for dollars. As a result, all oil from Russia will be exchanged on a gold basis."
How did this happen?
As far back as 2004, a deputy chair of the Bank of Russia noted the work of economists at GATA (the Gold Anti-Trust Action Committee).
Subsequently, efforts to move from dollar-only trade for oil, to Chinese yuan trade for oil, occurred.
At the same time, Russia used its status as a mining powerhouse to mine and then purchase millions of ounces over the last 18 years, while getting its financial house in order as far as possible, with an official budget deficit in 2020 of 3.8% of GDP.
Now, with no other means of foreign payment available after its external bank accounts have been frozen, Russia has no choice but to accept either another country's currency, gold, or some other commodity.
By doing so, it can instantly cause a rise in the purchasing power of the Russia ruble at a time when the government likely needs a boost in popularity.
At the same time, doing so, especially in combination with its allies and potential partners like Saudi Arabia (who recently refused to meet President Biden - an unheard-of event!), means that it can inflict economic pain on the United States with gold-for-oil.
Twenty years ago, it used to lack a partner to exchange with. However, China has become at a minimum an ally of convenience with enough reserves to fund the Russian government. Therefore - Russia has virtually everything in place to flip to gold-for-oil right now.
The amount of economic damage currently being wrought against Russia right now is immense, in the words of US politicians. Taking this at face value, the Russian government must act soon before food affordability leads to a color revolution at home. Furthermore, the Russian government would not want to "show weakness" in standing up to the United States, so it must not only act, but act soon.
What does it mean?
The declaration of gold-for-oil by Russia, in tandem with its partners, will be a defining event of the 21st century. Instantaneously, pressure on American financial markets, particularly precious metals, will be extreme. Inflation will be "unhidden" by a rise in dollar-denominated gold, which will then create massive chaos within the US economy.
Our goal is to help average individuals and corporations do everything possible to mitigate the coming shocks. We provide the historical learnings for businesses, based on past hyperinflation events, on how other businesses have managed to thrive under the worst economic conditions.
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